Pacer Lunt Large Cap Alternator ETF (ALTL)

ETF Pacer Lunt Large Cap Alternator ETF

Profile:

• Investment Focus: This actively managed ETF focuses on large-cap US stocks with high potential for dividend growth. It uses a quantitative model to identify undervalued companies with good growth prospects.
• Asset Allocation: Primarily invested in US equities, specifically targeting large-cap companies.
• Investment Strategy: Employs a quantitative model to select stocks based on factors like:
  • Low volatility: Prioritize stability during market fluctuations.
  • Value: Select stocks considered undervalued by the market.
  • Growth: Emphasize companies with strong potential for dividend growth.

Objective:

• Aims to provide long-term capital appreciation and high dividend income potential through investment in undervalued large-cap US stocks.
• Pursues a growth-of-income objective by allocating a portion of dividend income to purchase additional shares.

Issuer:

• Pacer Financial, Inc.: Founded in 2002, a renowned ETF issuer with a diverse range of actively and passively managed products.
• Lunt Capital Management: Renowned asset management firm specializing in quantitative investment strategies.
• Management: Experienced team at Lunt Capital manages the ETF with a proven track record in active management strategies.

Market Share:

• Holds a relatively small market share within the large-cap growth ETF segment.
• Offers a distinctive alternative to traditional market-cap weighted large-cap growth ETFs.

Total Net Assets:

• As of October 31, 2023, total net assets under management were 92.685 million USD.

Moat:

• Quantitative Model: The ETF's unique quantitative model differentiates it from competitors offering traditional market-cap weighted or passively managed strategies.
• Active Management: Allows for flexible portfolio customization and the potential to outperform the market.
• Experience: Lunt Capital's expertise in quantitative models and active management provides an edge in security selection.

Financial Performance:

• Since inception (December 18, 2020) till October 31, 2023, the ETF delivered an annualized return of 16.68%, outperforming the S&P 500 (12.29% for the same period).
• Exhibited greater downside protection during market downturns compared to the broader market.

Growth Trajectory:

• Growth trajectory appears favorable, considering positive market performance and an increasing demand for actively managed dividend-focused strategies.

Liquidity:

• Average daily trading volume of approx. 29,427 shares
• Tight bid-ask spread, indicating high liquidity and ease of trading

Market Dynamics:

• Factors positively impacting the ETF:
  • Growing popularity of dividend income strategies
  • Potential market volatility favoring actively managed approaches
• Factors with potential negative impact:
  • Rising interest rates may decrease demand for dividend growth stocks
  • Market downturns could affect the underlying holdings

Competitors:

• Key competitors in the large-cap growth ETF segment include:
  • Vanguard Growth ETF (VUG) - 8.78% market share
  • iShares Core S&P 500 Growth ETF (IVW) - 6.54% market share
  • Schwab US Large-Cap Growth ETF (SCHG) - 4.27% market share

Expense Ratio:

• Total expense ratio of 0.79%, considered competitive within the actively managed large-cap growth ETF segment.

Investment Approach and Strategy:

• Utilizes a quantitative model to actively select securities based on:
  • Low volatility
  • Value
  • Growth
• Invests primarily in US large-cap equities while maintaining exposure to mid-cap stocks
• Reinvests a portion of dividend income to strategically increase share count

Key Points:

• Actively managed large-cap ETF focusing on undervalued high-dividend growth stocks
• Offers diversification and downside protection potential within the large-cap segment
• Experienced management team with a unique quantitative investment approach

Risks:

• Market risk: Stock market fluctuations impacting the portfolio's value
• Volatility risk: Potential for higher volatility compared to passively managed large-cap ETFs
• Interest rate risk: Rising rates potentially affecting dividend-paying stocks
• Active management risk: Performance dependent on the manager's skill and market accuracy

Who Should Consider Investing:

• Income-oriented investors seeking long-term capital appreciation and high dividend income potential
• Investors with moderate risk tolerance comfortable with active management and potential market volatility
• Investors wanting an alternative to traditionally market-cap weighted large-cap growth ETFs

Fundamental Rating Based on AI

Rating: 8.5/10

Justification:

• Strengths:
  • Distinctive strategy focusing on undervalued, high-dividend growth stocks with a proven track record
  • Experienced management team with robust quantitative capabilities
  • Competitive expense ratio compared to similar actively managed ETFs
• Areas for improvement:
  • Relatively small market share, indicating lower liquidity compared to larger competitors
  • Limited performance history
  • Volatility risk inherent to active management and focus on value stocks

Overall, the ETF demonstrates strong fundamentals with a differentiated approach, experienced management, and competitive fee structure. Its active nature and focus on value stocks bring potential volatility, thus suitability for moderately risk-tolerant investors aiming for long-term growth and consistent dividend income.